Introduction

The aim of this post is to explain how open sourcing a proprietary tool under a duel license can be more profitable than a solely proprietary venture. With such a license you could generate more revenue and share your code and software with the world.

Dual licensing is a strategy that combines open source distribution with proprietary licensing. I don’t want to spend too much time explaining duel licensing and would rather point out its benefits and how it makes money. But if you don’t know what duel licensing is, wikipedia describes it as

In this model, one option is a proprietary software license, which allows the possibility of creating proprietary applications derived from it, while the other license is a copyleft free software/open-source license, thus requiring any derived work to be released under the same license. The copyright holder of the software then typically gives away the free/open source version of the software at no cost, and profits by selling licenses to commercial operations looking to incorporate the software into their own business.

So, in order to use the free half of this duel license, the using organization would have to contribute back anything they develop using your product. This means their proprietary trade secrets are potentially being made available to the public. Many organizations would rather pay a small fee to protect their competitive advantage.

So lets review some of the ways that duel licensing grants an advantage to business that release their products under two or more conditions.

Low Cost Distribution

Open source software depends on the Internet for distribution. The internet is cheap, ubiquitous throughout the world, and fast. There is no need to mail a product to the other side of the world, there is no packaging, Usually the customer uses 100% of their own efforts to get the software. That is to say, the find your site, they download it, and they install it. It doesn’t get any cheaper than that.

Product Marketing

First, your product is potentially free. That’s some awesome marketing. So right away you have eyes looking at your tool so you’re way ahead of your proprietary competition. You’ve got the Internet which is almost free to promote your software tool on. And with a good product, you’re going to have advocates around the internet talking up your tool.

High Margin

Duel licensing provides a means for producing a very high margin for your product. With a service based offering, in order to offer more services, you need to spend more money - for tools, personnel, time. Duel licensed software requires no additional resources, just enough time to generate and mail out a new license. Once the code is created and ready for public consumption its all profit from there.

Market Entrance

You may be able to capture users that you never would have had a chance with if they have not found your product to be free, and then determined that they needed to change it, and thus buy a a license to protect their proprietary information.

Learn More

I learned all about duel licensing open source products from a great book called Open Sources 2.0. From amazon:

“Open Sources 2.0″ is a collection of insightful and thought-provoking essays from today’s technology leaders that continues painting the evolutionary picture that developed in the 1999 book “Open Sources: Voices from the Revolution” .

These essays are very well written, cover a very broad range of topics, and is written by open source contributors that we have all grown to know and love. Buy the book and check out Chapter 5:Duel Licensing.